Analysts: Apple Well-Positioned To Drive Market Share Gains With 2020 Product Cycle

Apple Inc. AAPL shares have been picking up momentum since the Sept. 10 launch of the latest iteration of its flagship product, the iPhone.

The sell-side is increasingly upbeat on the prospects of the product cycle, especially after the lukewarm showing by the iPhone 10 lineup launched last year.

The Analyst

Samik Chatterjee maintained an Overweight rating on Apple and increased the price target from $243 to $265. 

The Thesis

Apple has the ability to drive upward revision to volume expectations, Chatterjee said in a Monday note. (See his track record here.)

That's notwithstanding the supposedly muted product cycle in 2019 due to limited hardware enhancements and associated replacement cycle risks in the wake of the likely launch of a 5G phone next year, the analyst said. 

JPMorgan raised its iPhone volume estimates for the fourth quarter of 2019 by 1 million units and by 3 million units for the first quarter of 2020. 

" ... We believe the volume upside in 2019 will have significance in demonstrating that the firm can deliver balance of volume and profitability even in a tough backdrop." 

The analyst now expects one new iPhone model in the first half of the calendar  2020, followed by three 5G-enabled iPhones in September 2020.

In volume terms, Chatterjee forecast volumes of 198 million units for 2020 and 200 million units for 2021.

Strong consumer interest in 5G phones is likely at the premium end of the North American market, the analyst said. 

"Apple is well-positioned to drive an outsized share with its 2020 product cycle," he said. 

Yet JPMorgan said its EPS forecasts haven't risen by as much as its volume forecasts, citing adverse forex conditions and a lower gross margin forecast. 

The sell-side firm sees upside on several aspects of Apple's business, such as the "transformation of the company to Services, growth in the installed base, technology leadership and optionality around capital deployment."

All of these factors will likely lead to double-digit earnings growth and a modest re-rating for the shares, Chatterjee said. 

The Price Action

Apple shares were up 2.36% at $223.99 at the time of publication. 

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Photo courtesy of Apple.